What Is Embedded Derivatives | CA Final SFM | Derivatives

[@aawazdoabhi]

Wow !! Just wow

[@balakumawat5239]

I searched for many videos to understand the concept of embedded derivatives but didn't find any good video... Really a good video.. Truly explained it very well😊

[@Hidayah_seeker]

What a cool explanation it was! Keep it up!

[@successmaharjan2906]

I never understood the concept of embedded derivatives but after watching this video , it helped me. thanks a lot.

[@smrutiagarwal]

Hi sir very good morning,
In embedded derivative (Financial instruments): Illustration number 6 page 12.139 ICAI module,
We ( ABG private limited ) are importer of solar machine and we booked a forward $ buy conteact @ Rs. 65/$.
Payment due is : $ 50 million.
And if on maturity, $ reaches to Rs. 66/$.
Are we at gain or loss?
In my opinion, we are at gain because we locked the buying rate @ 65 rs./$.
And it has increased to we saved Rs. 1.
But in financial instruments, Ind as 109, they are writing we are at loss of rs. 1 /$. So total loss Rs. 50 million ( $50 million * rs.1/$ = rs. 50 million )
1.They first make a host purchase contract for buying $ and they it is denominated in functional currency i.e. Rupee.
($50 million * 65= rs. 3250 million).
Amount in functional currency is rs. 3250 million
2. They determined this amount of Rs. 3250 million using relevent forward exchange rate i.e. Rs. 65/$.
3. The embedded derivative is a forward currency contract to sell the applicable amount ($ 50 million) of the contract currency ($) for the functional currency (rupee), at the same forward exchange rate. Total comes same rupee 3250 million.
Therefore, the effect is that the fair value of the embedded derivative is intiallly 00.
4. Subsequent changes in the fair value of embedded derivative are recorded in profit and loss.
5. On delivery of the non-financial item (solar panel) the host contract is fulfilled and the embedded derivative is effectively settled.
A foreign currency creditor is recognised for the contract amount ($ tp million ), translated at the spot rate (Rs.66/$).
The closing carrying amount of embedded derivative ($ 50million *rs 1/$ = Rs. 5 crore ) is added to the functional currency amount (325 crores )
So total 325 crore +5 crore = 330 crores.

[@ruchimaheshwari6863]

In ind as 109, in this question we have not taken future contract and therefore the loss has been accounted as loss in pl and not added to the cost of inventory

[@smrutiagarwal]

Hi sir very good morning,
In embedded derivative (Financial instruments): Illustration number 6 page 12.139 ICAI module,
We ( ABG private limited ) are importer of solar machine and we booked a forward $ buy conteact @ Rs. 65/$.
Payment due is : $ 50 million.
And if on maturity, $ reaches to Rs. 66/$.
Are we at gain or loss?
In my opinion, we are at gain because we locked the buying rate @ 65 rs./$.
And it has increased to we saved Rs. 1.
But in financial instruments, Ind as 109, they are writing we are at loss of rs. 1 /$. So total loss Rs. 50 million ( $50 million * rs.1/$ = rs. 50 million )

[@raikwar_sr]

Thanks sir🙏

[@vamshi6013]

beautifully explained..

[@amitranjanjena6462]

Thank you Sir

[@arunsaluja4512]

Thanks

[@Infinity0709]

Thank you so much sir...... wonderfully explained.... do any revision lectures for ca final sir ... basically for new syllabus theory part.....

[@sreansable]

sir is your sfm charts still available ? if yes please send the link

[@CAMayankKothari]

sreansable... Www.conferenza.in

[@camanmeetpatro1850]

thanks for the video sir

[@caabhishekchugh9261]

Sir please provide the video for Macaulay and modified duration.

[@ratikabhati1414]

sir your fast track course and institute study material +practice manual enough for preparation.

[@commerceyugaletschangethew9763]

Thanks sir

[@ratikabhati1414]

thank you sir